Alternative Valuation Method For Gross Estate

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For estate tax purposes, the value of one’s gross estate is usually determined on the date of death. However, the executor of the estate may choose to use an alternative method to value the decedent’s gross estate.

What Is The Alternative Valuation Method For Gross Estate?

Instead of valuing the gross estate at the date of death, the executor may choose to value the gross estate at an alternative date other than the date of death. This date is six months after the date of death of the decedent if the property is not otherwise sold, distributed, or disposed of within those six months.

If the property is in fact sold, distributed, or disposed of within those six months, then the value is determined at the date of the sale, distribution, or disposition.

What Is The Benefit Of Electing To Use The Alternative Valuation Method?

One benefit of using the alternative valuation method is that you may be able to reduce the amount of estate taxes if you believe the property in the gross estate will depreciate in the six months after the date of the decedent’s death. The downside to this is that the step-up basis that the recipient of the inherited property will receive will also be determined at the alternative valuation date, which could be lower than the date of death.

Under What Condition Is The Alternative Valuation Method Not Available?

The executor can only elect to use the alternative valuation method if it will lower both:

    1. The value of the gross estate; and
    2. The sum of the estate tax and generation-skipping tax after taking the application of all allowable credits against these taxes.

Estates that owe no federal estate tax or no generation skipping tax may not use the alternative valuation method.

When Must This Election Be Made?

This election must be made within 1 year after the due date of the federal estate tax return (including extensions). There is no exception to this 1 year rule.

Do I Need an Estate Planning Attorney?

Consultation with an attorney experienced in estate planning is essential to crafting an estate plan that is sensitive to both your needs and those of your loved ones. A lawyer will know which type of will or trust is right for you and will do their best to limit your tax liability.

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Last Modified: 06-13-2013 04:22 PM PDT

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